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Budget for 2013 leads to cautious optimism in Covington

Covington’s economy turned a corner in 2012, which means there is more good news to report as the City Council prepares to approve the 2013 budget in December.

In his budget message at the Oct. 9 City Council meeting, City Manager Derek Matheson wrote, “Major benchmarks have trended upward this year changing the outlook from one of concern to cautious optimism.”

Matheson pointed to the fact the city seemed to do well despite the slower recovery the country has experienced since the 2008 recession took hold and Covington “continues to capitalize on

on opportunities to put (it) on the map as a municipal leader across the state.”

Financial Director Rob Hendrickson said the general fund forecast, for example, looks better this fall than it did in the summer which will bolster other funds in the budget such as parks and streets.

“What we’re seeing this year, which will roll into next year, is better revenue base,” Hendrickson said. “We’re starting to see the turnaround in the economy.”

Thanks to increases in revenue from the real estate excise tax and the city’s utility tax, as well as lower expenditure increases in other areas, Hendrickson said the city’s budget is looking healthier all the time.

Covington contracts with the King County Sheriff’s Office for police services. That contract went up 1 percent for 2013, which is considerably less, as it has gone up an average of 5 percent in previous years.

Meanwhile, the city’s health insurance benefits increased just 6 percent, which is in contrast to several years in a row of double digit increases. In addition, the city is now contract with SCORE for jail services, which has significantly reduced costs, Hendrickson said.

With the general fund in good shape, Hendrickson said, the development services and surface water management funds are also doing well.

Thanks to more permits this year than in 2011 for single family residences, the development services fund is doing well. Then with MultiCare’s hospital under construction and Valley Medical Center’s project nearing completion, the city will have 232,000 square feet of medical and professional office space coming in which will have a positive impact on the economy.

“We’re becoming a hub of medical facilities,” Hendrickson said. “That brings in living wage jobs, increases the daytime population, so that swings back to more revenue from sales tax. Those people, they’re here during the day, they’re shopping, they’re eating here.”

Still, that does not mean the city’s budget is without challenges. Hendrickson noted the parks and streets funds have long been weak areas, but when it comes to street maintenance, that’s a problem every city in the state is dealing with.

That is why more and more municipal governments are opting for transportation benefit districts to generate money to pay for street repairs and maintenance projects.

In order to manage the need, Covington’s Budget Priority Advisory Committee will likely recommend the city increase its sales tax rate from 8.6 percent to 8.8 percent.

It’s a small increase that is favored because it won’t likely be too noticeable by shoppers plus it will be paid by both residents and visitors to the city. Yet, it can bring in significant revenue.

“That would bring in an estimated $670,000 to the street fund,” Hendrickson said. “The general fund would get the subsidy money back … which is almost a quarter of a million dollars. That would free up money in the general fund for other programs. And that would make the street fund sustainable.”

Long-term, Hendrickson said, the general fund looks good for the next six years but parks and streets could still struggle.

Parks revenue is up this year, however, thanks in part to increased attendance at the Covington Aquatic Center. A portion of the sales tax goes to the parks fund but even with the increase it will be offset because of the cost of operating a pool — a cost that goes up every year.

In his budget message, Matheson offered a positive conclusion on the overall state of the city’s finances.

“All in all, the 2013 budget looks more promising than we have seen in a number of years,” Matheson wrote. “I have been able to recommend some decision cards that are important; there has been some belt-tightening which creates more efficiency; and with the BPAC report expected by year-end there is some real optimism.”

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